Trusts Flashcards
Elements of an Express Trust —
1) a settlor with capacity to convey; 2) a present intent to create a trust relationship; 3) a competent trustee with duties; 4) a definite beneficiary; and 5) the same person is not the sole trustee and sole beneficiary. There must also be a present disposition in trust of specific property then owned by the settlor and the trust must have a valid trust purpose.
Express trusts are governed by what?
The Uniform Trust Code
What are the types of trusts?
Express and implied
How can present intent to create an express trust be manifested?
Written or spoken words.
An oral express trust of personal property is __________.
valid
Must the intent to create an express trust be communicated directly to the beneficiary?
No. Delivery of the deed to the trustee is sufficient.
May a settlor convey property in express trust which he does not own?
No. The settlor must own the property in order to convey it in trust.
A trust must take effect _____________.
immediately. There is no such thing as a future trust, though there can be a future interest in trust property.
Does precatory language create an express trust?
No. Mere hopes, wishes or suggestions do not create a trust.
If the trustee to a trust dies, refuses to accept, or resigns, what is the result?
The trust will not fail. The court will appoint a successor trustee unless it was evident that the trust was only to continue so long as the particular named trustee served.
How does a person accept a trusteeship?
By substantially complying with the acceptance terms in the trust instrument; or accepting the delivery of trust property, exercising powers or performing duties as a trustee, or indicating acceptance.
A person who is named as a trustee but who rejects it still has a responsibility to do what?
Preserve the trust property until someone else is appointed the trustee.
If a trusteeship is not accepted within a reasonable time, it is deemed . . .
rejected.
A settlor must intend to impose ________________ on the trustee.
enforceable duties
Who can be a trustee?
Anyone who has capacity to acquire and hold property fr his own benefit and to administer the trust.
Is a trustee entitled to compensation?
Yes, reasonable compensation.
A court or a settlor, beneficiary, or co-trustee may remove a trustee for what purpose?
unfitness, unwillingness, persistent failure to administer, a serious breach of trust, or lack of cooperation.
Trust —
an arrangement under which the trustee holds legal title to property for the benefit of the beneficiaries. The trustee has burdens and beneficiaries have benefits of ownership
What happens if the trustee and the beneficiary are the same person?
The titles merge and the trust terminates.
A trust cannot exist without . . .
someone to enforce it; i.e. a beneficiary.
Qualified Beneficiary —
a beneficiary who, on the date the beneficiary’s qualification is determined, is 1) a current beneficiary; or 2) a first-line remainderman.
Who can be a beneficiary?
Anyone, including natural and artificial persons, capable of taking and holding title to property can be a beneficiary of a private trust.
Can someone accidentally be a beneficiary of a trust?
No. A beneficiary must be intended.
Must notice be given to a beneficiary in order for a valid trust to be created?
No. Notice to the beneficiary is not required. Acceptance is required however.
How can a beneficiary disclaim their interest in a trust?
Filing a written instrument with the trustee which disclaims the interest. This must usually be done within 9 months of the creation of the trust.
What can prevent a beneficiary from disclaiming their interests in a trust?
Where the B has exercised any dominion or control over the interest.
Escrow Arrangement —
a holder of property places the property in the possession of another for the purpose of giving the property to a third party. The person who the holder gives the property is the escrow agent, and they do not have title over the property.
There must be ___________ beneficiaries in order to have a private trust.
definite
Beneficiaries may be definite even though . . .
they are not ascertained.
Beneficiaries to a trust must be ascertainable . . .
at the time their benefit comes into enjoyment.
If a private trust exists for the benefit of a class, the class must be . . .
reasonably definite.
Resulting Trust —
where a trust fails for lack of a beneficiary. The property goes back to the settlor. An implied reversion.
Res —
the trust property. Where there is no res, there is no trust.
Can a settlor place property in trust when the property is not legally held by the creator?
No. Interests in property not yet in legal existence cannot be held in trust.
A trust’s res must be _______________ from other property of the settlor.
segregated/separated
Can a debtor hold their own debt in trust?
No, but a debtor can declare himself trustee of particular property from which the debt is to be paid. The debt can be held in trust by another person.
What purposes can cause a trust to be invalid?
Where the trust’s purpose is illegal, against public policy, impossible to achieve, or intended to defraud the settlor’s creditors or based on illegal consideration.
What are the media in which a trust can be created?
1) inter vivos transfer; 2) inter vivos declaration of trust; or 3) by will.
Inter Vivos Trust —
a trust which is made as a gift to another during the settlor’s lifetime.
Generally, an express trust can be created by a settlor doing two things:
1) declaring himself trustee for another; or 2) transferring property to another as trustee.
Most states do not require a writing for a trust of ____________________.
personal property
Oral trusts may be established by __________________ evidence.
clear and convincing
What kind of express trust must be written under the Statute of Frauds?
Trusts of land, which must be written, signed by the person entitled to impress the trust upon the property.
Testamentary Trust —
language in a will which evidences testamentary intent to transfer property to a trustee to be held in trust for another. The word trust is often not used.
What are the unique rules regarding a charitable trust?
Charitable trusts must have 1) indefinite beneficiaries; 2) it may be perpetual; and 3) the cy pres doctrine applies.
Charitable trusts may be ______________.
perpetual
Cy Pres Doctrine —
where the charitable purpose created by a settlor of a trust is impracticable, unlawful, impossible to achieve, or wasteful, the court may select an alternative by ascertaining the settlor’s primary purpose. This only applies to charitable trusts.
Honorary Trusts —
a trust established for a non-human beneficiary which places the trustee “on her honor” to carry out the terms of the trust.
To can enforce an honorary trust?
Anyone named in the trust or appointed by the court.
Generally, can a beneficiary assign their benefit in a trust?
Yes, absent a statute or language in the trust instrument prohibiting such an assignment.
Can creditors of a beneficiary get to his intended benefit from a trust?
Yes. Absent restrictions by statute or by the trust instrument, the beneficiary’s creditors may levy on his beneficial interest.
Spendthrift Trust —
a trust in which the trustee must make periodic payments to the beneficiary. It precludes the beneficiary from transferring his interest in a trust and prevents creditors from reaching it to satisfy their claims.
Creditors to a beneficiary of a spendthrift trust cannot reach the benefits of the trust until what?
Until the income has actually been paid to the beneficiary.
Can an assignee of a beneficiary’s interest in a spendthrift trust sue the trustee to enforce the transfer?
No. Assignees have no power to enforce an assignment. However, the trustee can agree to the assignment. The trustee can stop the assignment and continue to pay the intended beneficiary at any time.
A spendthrift trust cannot be used to shield the beneficiary from whom?
The beneficiaries creditors if the beneficiary is the settlor, court orders to support a spouse or child, or the government.
Discretionary trust —
the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary.
Can the benefits of a discretionary trust be assigned?
No
Can the benefits of a discretionary trust be gotten to by creditors?
Only if the trustee makes payments to the beneficiary. The creditors cannot force the trustee to make payments to the beneficiary.
Can the trustee be forced to make a payment?
No, unless the payment is for support of a child or spouse. The court can order that a trustee to make a payment to satisfy a spouse or child who is to be supported.
Can a beneficiary to a discretionary trust force the trustee to make a payment?
No
Support Trust —
directs the trustee to pay only so much of the income or principal as is necessary for the beneficiary’s support.
